This is an extract from Paul Collier's book The Future of Capitalism. Join our World Economic Forum Book Club to discuss this excerpt.

Passion and Pragmatism

Deep new rifts are tearing apart the fabric of our societies. They are bringing new anxieties and new anger to our people, and new passions to our politics. The social basis of these anxieties is geographic, educational and moral. It is the regions rebelling against the metropolis: Northern England versus London; the heartlands versus the coasts. It is the less educated rebelling against the more educated. It is the struggling workers rebelling against the ‘scroungers’ and ‘rent-seekers’. The less-educated, toiling provincial has replaced the working class as the revolutionary force in society: the sans culottes replaced by the sans cool. So, what are these people angry about?

Place has become a dimension of the new grievances because, after a long period during which geographic economic inequalities narrowed, they have been widening rapidly. Across North America, Europe and Japan, metropolitan areas are surging ahead of the rest of the nation. Not only are they becoming much richer than the provinces, socially they are becoming detached: no longer a part of the nation of which they are often the capital.

But even within the dynamic metropolis, these extraordinary economic gains are heavily skewed: the newly successful are neither capitalists nor ordinary workers: they are the well-educated with new skills. They have forged themselves into a new class, meeting at university, and developing a new shared identity in which esteem comes from skill. They have even developed a distinctive morality, elevating characteristics such as minority ethnicity and sexual orientation into group identities as victims. On the basis of their distinctive concern for victim groups, they claim moral superiority over the less-well educated. Having forged themselves into a new ruling class, the well-educated trust both government and each other more than ever.

While the fortunes of the educated have soared, pulling up national averages with them; the less-well educated, both in the metropolis and nationally, are now in crisis, stigmatised as the White Working Class. The syndrome of decline began with the loss of meaningful jobs. Globalisation shifted many semi-skilled jobs to Asia, and technological change is eliminating many others. The loss of jobs has hit two age groups particularly hard: older workers and those trying to find their first job.

Among older workers, job loss often led to family breakdown, drugs, alcohol and violence. In America, the resulting collapse in the sense of a purposeful life is manifested in falling life expectancy for whites who have not been to college: this, at a time when an unprecedented pace of medical advances is delivering rapidly rising life expectancy for more favoured groups. In Europe, social safety nets have muted the extremity of outcomes, but the syndrome is also widespread, and in the most broken cities like Blackpool, life expectancy is also falling. Redundant over-fifties are drinking the dregs of despair. Yet the less-educated young have fared little better. In much of Europe, young people face mass unemployment: currently, a third of young Italians are unemployed: a scale of job shortage last seen in the Depression of the 1930s. Surveys show an unprecedented level of youthful pessimism: most young people expect to have lower living standards than their parents. Nor is this a delusion: during the past four decades, the economic performance of capitalism has deteriorated. The Global Financial Crisis made it manifest, but from the 1980s it has been creeping up in the numbers. Capitalism’s core credential of steadily rising living standards for all has been tarnished: it has continued to deliver for some, but passed others by. In America, the emblematic core of capitalism, half of the 1980 generation are absolutely worse off than the generation of their parents at the same age. For them, capitalism is not working. Given the huge advances in knowledge of technology and public policy that have taken place since 1980, that failure is astounding. These advances, themselves dependent on capitalism, make it entirely feasible for everyone to have become substantially better off. Yet a majority now expect their children’s lives to be worse than their own. Among the American white working class this pessimism rises to an astonishing 76 per cent. Europeans are even more pessimistic than Americans.

The resentment of the less-educated is tinged with fear. They recognize that the well-educated are distancing themselves, socially and culturally. And conclude that both this distancing, and the emergence of more-favoured groups perceived as creaming off benefits, weaken their own claim to help. This erosion of their confidence in the future of their social safety net is happening just as their need for it has increased.

Anxiety, anger and despair have shredded people’s political allegiances, their trust in government, and even their trust in each other. The less-educated were the core of the mutinies that saw Trump defeat Clinton in the USA; Brexit defeat Remain in the UK; the insurgent parties of Le Pen and Melanchon gain over 40 per cent of the vote in France, shrivelling the incumbent social democrats to less than ten per cent; and in Germany so shrinking the Christian Democrat – Social Democrat coalition, that it turned the AfD (Alternative for Germany) into the official opposition in the Bundestag. The education divide was compounded by the geographic divide. London voted heavily for Remain, New York voted heavily for Clinton, Paris eschewed Le Pen and Melanchon; Frankfurt eschewed the AfD; the radical opposition came from the provinces. The mutinies were age-related but not as simple as old-versus-young. Both older workers who had been marginalised as their skills lost value, and youth entering a bleak job market, turned to the extremes. In France, youth voted disproportionately for the new-look far right; in Britain, and the USA, they voted disproportionately for the new-look far-left.

Nature abhors a vacuum, and so do voters. The frustration borne of this gulf between what has happened and what is feasible has provided the pulse of energy for two species of politician who were waiting in the wings. The last time capitalism derailed, in the 1930s, the same thing happened. The emerging dangers were crystalized by Aldous Huxley in Brave New World, and George Orwell in 1984. The end of the Cold War in 1989 appeared to usher in a credible prospect that all such disasters were behind us: we had arrived at ‘the end of history’: a permanent utopia. Instead, we are facing the all-too-credible prospect of our very own dystopia.

The new anxieties have promptly been answered by the old ideologies, returning us to the stale and abusive confrontation of left and right. An ideology offers the seductive combination of easy moral certainties and an all-purpose analysis, providing a confident reply to any problem. The revivalist ideologies of 19th Century Marxism, 20th Century Fascism and 17th Century religious fundamentalism have all already lured societies into tragedy. Because the ideologies failed, they lost most of their adherents, and so the species was almost extinct: few ideologue politicians were available to lead this revival. The only ideologues left belonged to tiny residue organisations: people with a taste for the paranoid psychology of the cult, and too blinkered to face the reality of past failure. In the decade preceding the collapse of Communism in 1989, the remaining Marxists thought they were living in ‘late capitalism’. The public memory of that collapse has now receded sufficiently to support a revival: there is a new flood of books on the same theme.

Rivalling the ideologies in seductive power, is the other species of politician: the charismatic populists. Populists eschew even the rudimentary analysis of an ideology, leaping directly to solutions that ring true for two minutes. Hence, their strategy is to distract voters from deeper thought through a kaleidoscope of entertainment. The leaders with these skills are drawn from another tiny pool: the media celebrities.

While both ideologues and populists thrive on the anxieties and anger generated by the new rifts, they are incapable of addressing them. The new rifts are not repeats of the past: they are complex new phenomena. But in the process of implementing their passionate snake oil, such politicians are capable of doing enormous damage. There are viable remedies to the damaging processes underway in our societies, but they derive neither from the moral passion of an ideology, nor the casual leap of populism. They are built upon analysis and evidence and so require the cool head of pragmatism. All the policies proposed in this book are pragmatic.

Yet there is a place for passion and it will suffuse the book. My own life has straddled each of the three grim rifts that have opened in our societies. While I have maintained a cool head, they have seared my heart.

These three appalling cleavages are not just problems that I study; they are the tragedies the have come to define my sense of purpose in life. This is why I have written this book: I want to change this situation.

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